NYSE Euronext (NYX) announced that beginning next month, it will provide a means for participating broker-dealers’ alternative trading systems (ATSs) and off-exchange market centers to create transparency regarding volume and individual “dark pool” activity by allowing the firms to “print” trades on the FINRA/NYSE Trade Reporting Facility (TRF) and display the daily activity of each trading venue on NYSE.com.
“This is an example of NYSE Euronext and the industry working together to develop a positive solution to address the lack of understanding regarding the extent and nature of ‘dark pool’ trading , which has been a concern for regulators and legislators,” said Joseph Mecane, NYSE Euronext’s Executive Vice President and Chief Administrative Officer for U.S. Markets. “We believe this will bring requisite and appropriate sunlight to alternative trading systems and other sources of off-exchange liquidity, and also help standardize the way their trading volumes are reported.”
NYSE Euronext has been discussing the idea with a number of firms that operate ATSs and off-exchange trading venues, and Barclays Capital, GETCO, Goldman Sachs Execution & Clearing, L.P., Knight Equity Markets, L.P. and UBS Investment Bank have volunteered to begin reporting their respective venues’ activity to the FINRA/NYSE TRF in November 2009. Other firms have indicated an interest in NYSE Euronext’s transparency initiative and are establishing the necessary technology to begin participating in the program in the coming weeks.
"This initiative is an important step toward the standardization of trade volume reporting across ATS venues," said Frank Troise, Head of Equities Electronic Product at Barclays Capital. "Industry participants will be able to make more informed order placement decisions and thereby improve their execution quality."
"We need to maintain the right balance between vibrant public price discovery and individual execution preference," said Jon Ross head of GETCO Execution Services. "This initiative is an important first step in collecting the data critical to analyzing and preserving that balance."
“We’re looking forward to the launch of NYSE Euronext’s ATS-transparency initiative,” said Greg Tusar, Head of Electronic Trading in the Americas at Goldman Sachs. “By publishing trading volume on its website, NYSE Euronext has spearheaded an industry-driven solution which provides a public source for evaluating broker-dealer ATS volumes.”
"Knight is pleased to work with NYSE Euronext to increase transparency among off exchange liquidity providers through their FINRA/NYSE Trade Reporting Facility,” said Jamil Nazarali, Managing Director, Knight Equity Markets. "This new facility will enable market participants to better evaluate and compare competing pools of liquidity to make more informed routing decisions."
Charlie Susi, Head of Direct Execution for the Americas at UBS Investment Bank, said, “The way the industry has advertised non-displayed volumes and crossing rates has been highly inconsistent – which makes it very difficult for clients to get a clear picture of liquidity. This initiative is something we're pleased to see, because it will establish better objectivity and clarity. We encourage all of our peers to join us in participating.”
The daily trading activity volume published by the FINRA/NYSE TRF will be based on trades reported to the FINRA/NYSE TRF, which follow FINRA’s trade-reporting rules. Basing the published volume strictly on trade reports will address some of the problems associated with voluntary reporting by ATSs of their own volume, such as counting both sides of a trade, and counting trades that are routed by not executed. Trades reported to FINRA/NYSE TRF will be single-counted and matched-only. All ATS trades are currently reported to an industry TRF, which in turn drives the various “time and sales” market data feeds. This initiative attributes the volumes to the matching destination.
Each trade reporting facility provides a mechanism for the reporting of transactions effected otherwise than on an exchange. While each TRF is affiliated with a registered national securities exchange, each TRF is a FINRA facility and is subject to FINRA's registration as a national securities association.